4 Business Objectives

Candidates should be able to:

Understand the importance of SMART objectives.

Identify the benefits and limitations of mission statements.

Understand the importance of CSR.

Know the arguments for and against CSR.

Understand the link between aims, objectives, strategies and tactics.

Understand the framework of business decision-making.

Identify factors determining business objectives.

Identify the features of MBO.

Understand the role of ethics in decisions.

Definitions
Long-term goals or plans that dictate a businessʼs activities and
Objectives
decisions.

Very long-term goals that are based on a businessʼs central

Corporate aims
purpose.

A short and clever statement which summarises a businessʼs

Mission statement
central aims.

Strategies Precise goals and plans used to achieve business objectives.

Time-constrained, short-term actions that support business

Tactics
objectives and strategies.

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 An outlook on business objectives which recognises that a
CSR business is responsible to society, local community and
environment rather than just shareholders.

A method of coordinating the businessʼs departments and

MBO workers by dividing objectives into departmental and individual
targets.

An official document stating the rules on behaviour that a

Ethical code of conduct
companyʼs workforce must follow.

4.1 Business Objectives in The Private

Sector
4.1.1 The importance of SMART objectives
The purpose of objectives

To facilitate managers in planning strategies and tactics.

To give the business a direction to work towards.

To motivate employees.

To assess the businessʼs progress over time.

So, resources can be planned and managed efficiently and effectively.

The SMART criteria.

Objectives should be specific to the business model and structure.
Objectives should be
measurable and translated in quantitative figures. This makes it easier for
managers to assess progress and conduct departmental and individual appraisal.

Realistic objectives should take into account the available resources of the
business. For example, a new business should not set an objective to become

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 market leader in a year.

Objectives should be time-specific. Meaning that there should be a time limit till
when the objective must be
achieved.

4.1.2 The hierarchy of objectives

Corporate aims
Long-term objectives of a business.

Based on the central or core vision of a business.

Companies, partnerships and sole traders alike must have corporate aims.

The importance of corporate aims

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 They become the foundation of objectives that effective management is based
on.

They motivate the workforce of the business by giving it purpose, vision and
direction.

They are a measurement of the businessʼs performance over a certain time

period.

Allows for clear, relevant and effective strategies to be applied.

Encourage the business to work consistently and coordinate activities

between departments.

Mission statements
Businesses communicate their central purpose or corporate aims into a
condensed and clever statement known as the ‘mission statementʼ.

These sentences are often phrased in a catchy way in order to motivate

employees and attract the attention of external stakeholders such as
customers and potential investors.

Microsoftʼs mission statement: to enable people and businesses throughout

the world to realise their full potential.

Sonyʼs mission statement: to be a company that inspires and fulfils your

curiosity.

Advantages Disadvantages

Quickly inform stakeholders of the

Give little detail about the businessʼs plans .
businessʼs vision.

Motivates employees. May be a PR tactic with little gentility.

Defines values of business that employees

Difficult to analyse, vague.
follow.

Not unique; two businesses may have the

Can potentially attract investors.
same mission statement.

Corporate objectives
Aims and missions do not provide for specific targets that can measured.

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 Corporate objectives are specific goals that reflect the main aims and missions
of the business.

They provide basis for management to plan and implement effective

strategies and tactics.

Common corporate objectives

Profit maximisation.

Increasing market share.

Growth.

Survival.

Maximising shareholder value.

Corporate Social Responsibility.

Important Note

The setting of clear objectives is essential for effective

management

Corporate Social Reasonability (CSR)

By having CSR as an objective, businesses consider the potential impact of
activities on society, the community, the environment and other stakeholders
such as customers and employees.

CSR entails that the business takes responsibility for its actions and contribute
positively to society.

This may include paying fair wages to employees.

Adapting environmentally sustainable methods of production.

Disposing waste responsibility.

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 Sourcing materials ethically.

Avoiding testing on animals.

Important Note

Adopting CSR sacrifices on short-term profits but entails long-

term rewards that increase the value of the businessʼs products
or services.

Benefits of CSR
CSR gives the business a good reputation.

It may become the businessʼs unique selling point.

Customers may be willing to pay higher prices for an ethical business.

Potential investors may be attracted.

Qualified workers will be more willing to apply to an ethical company.

The government may be more willing to offer support to businesses that fulfil
CSR.

Local community will be more supportive if their needs are taken care of.

Costs of CSR
CSR measures are costly e.g., paying higher wages to employees.

In some regions, customers and other stakeholders may not be interested in

social and environmental issues, decreasing the cost-effectiveness of CSR.

External stakeholders may view CSR as a public relations tactic, which will
actually harm the businessʼs reputation.

The extent of CSR depends on the culture of the country or region the business
operates in, the extent of pressure from NGOs and pressure groups and the

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 personal values and morals of the owners or directors.

Skill Check 1

Briefly explain what is meant by a ‘mission statementʼ

Solution

A mission statement is a brief and catchy sentence which summarises the

overall aims and vision of a business. It is often phrased in a way that
motivates the employees of the company and stimulates interest in the
business such as from potential investors and lenders.

Skill Check 2

Briefly explain what is meant by corporate social responsibility.

Solution

Corporate social responsibility is a concept which recognizes that a

business is responsible and accountable to society, the environment and the
local community rather than just its owners. It entails making ethical
considerations in decision-making and actions. For example, adopting
environmentally sustainable production is a part of CSR.

4.2 Objectives and Business Decisions

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 4.2.1 The relationship between mission, objectives,
strategies and tactics
Aims and objectives provide a business the basis for strategies. Strategies are
clear plans of action that facilitate the business in achieving its overall aims and
objectives. Based on these aims, the manager takes important strategic decisions.
Tactics are short-term steps and actions that support the strategy of a business.
For example, the marketing manager may alter the promotion mix by changing
advertising channels to maximise sales.

4.2.2 The stages of business decision-making

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 4.2.3 Why business objectives may change overtime
A new business with a survival objective may have achieved this objective and
may move on to a growth objective.

There maybe changes in the businessʼs external environment such as

economic downturn, entrance of new competitors etc. This may force a
business to switch to a survival objective.

A business may gain access to increased capital and resources, enabling it to

grow.

Factors affecting business objectives

1. Corporate culture

Culture refers to how people conduct duties and tasks in the business
organisation including the working environment of the business e.g., it may be
aggressive or supportive. This also depends on the personal values of the owners.

2. The legal structure of the business

Smaller businesses such as sole traders may have an objective to make satisfying
profit. Larger businesses such as public limited companies may want to grow and
expand in order to increase the companyʼs status in the market.

3. Public or private sector

Businesses operating in the public sector mostly do not have a profit-making

objective as they provide services such as education, health, defence etc. which
customers are not charged for. Instead, measurements to assess progress are
based on the quality of service provided.

4.2.4 Translation of objectives into targets and

budgets

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 Once corporate objectives have been set, they are broken down into smaller
targets for divisions, departments and individuals.

The importance of divisional targets

Allows for coordination between divisions and eliminates confusion.

Adequate resources are allocated to each division based on their targets.

Divisional targets are then translated into departmental and individual targets and
budgets. The overall budget of them aim will be divided and allocated to each
department based on its duties and responsibilities.

4.2.5 Management by objectives (MBO)

The breaking down of overall aims into individual targets and responsibilities
enables management by objectives.

The features of MBO

Effective delegation of responsibility can take place if overall aims and
individual targets are communicated to employees.

This way employees can contribute to the achievement of objectives more

effectively.

This prevents alienation of employees as they know how their individual goals
fit into the businessʼs overall objectives.

Managers can use individual targets to appraise employees and take

corrective action if needed.

4.2.6 The role of ethics in business objectives

Due to the increasing importance of CSR, businesses are adopting ethical codes
of conduct which influence and dictate the way managers and employees take
decisions and actions.

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 Some ethical considerations include; Should a manufacturer of
components/machinery sell to a company producing hazardous products such as
cigarettes?
Should harmful products be excessively advertised e.g., alcohol.
Should a business shut down operations even if hundreds of employees will lose
their jobs?
Is it acceptable to pay low wages to labor if labor legislation in the home country is
weak?

Benefits of ethical decisions

Long-term brand development and customer loyalty.

Prevention of costly lawsuits.

Increased chances to gain government grants and community support

Well-qualified employees will be willing to work in the company.

Customers may pay higher prices for an ethical brand.

Costs of ethical decisions

Limiting promotion to reduce wastage may result in loss of sales.

Sustainable production may be more costly.

Ethical suppliers may increase the businessʼs cost of sales.

High wages will decrease the businessʼs profit margin.

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 Skill Check 3

Briefly explain how ethics influence the customers of a business.

Solution

If a business chooses to include ethics in its decisions, customers will

benefit in some ways. For example, the business may adopt higher
health and safety standards for its products, resulting in customers
receiving a high quality and safe product. However, customers may have
to pay higher prices for ethical activities and decisions. For example, if a
business chooses to use more ethical but costly suppliers, the increase
in costs will be passed on to customers in the form of higher prices.

4.3 Social Enterprise

4.3.1 The aims and purpose of a social enterprise
A social enterprise is a business with social or environmental objectives. Profits
are reinvested to achieve these goals in ethical ways rather than used to maximise
gains of owners.

The activities of a social enterprise include;

Providing training and employment to recovering drug addicts.

Improving the environment by clearing litter and recycling waste.

Increasing employment for women.

Producing goods in ethical ways by buying from ethical suppliers, using

environmentally friendly ways of production, paying workers fair wages etc.

Providing low-cost services to charities or NGOs.

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 4.3.2 The triple bottom-line
Social enterprises have three main aims; Economic, Social and Environmental.
This is referred to the organisationʼs triple bottom-line.

Economic aim: To make profit and reinvest most of it back into the business.

Social aim: To support disadvantaged communities by providing them with

employment and training.

Environmental aim: To protect the environment by producing in ethical ways,

disposing off waste responsibility, minimising pollution etc.

Skill Check 4

Briefly explain the meaning of a triple bottom-line.

Solution

A triple bottom-line refers to the three main objectives of a social

enterprise which include economic, social and environmental objectives.
The economic aims of a social enterprise are to generate profit and
reinvest most of it back into the business while giving some returns to
owners. Social objectives include bettering the community by e.g.,
increasing employment, providing training to vulnerable groups of
people or providing funding to NGOs. Lastly, environmental objectives
are those meant to protect the environment. Environmental objectives
may consist of sustainable production and packaging, responsible waste
disposal, planting trees, funding ENGOs etc.

Points to Note

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 Objectives provide focus, direction and framework for business decisions,
ensure that department sand divisions stay coordinate, provide basis for
individual tasks and targets.

The integration of CSR and ethics in business objectives is becoming

increasingly important due to rising social awareness across the world.
Businesses use CSR as a marketing tool. A cost-benefit analysis should be
conducted by a business before deciding the extent of CSR that should be
adopted. Remember that market research is essential in determining whether
CSR will lead an increase in sales.

First, a business sets objective. Then it is decided how these objectives can
be achieved (strategies). Based on this, departmental and individual targets
are set (tactics) to facilitate the achievement of the objectives and strategies.

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